The Greeks Are Sobering Up

By Costas Paris

They gave a resounding ‘no’ to parties backing a draconian austerity program that has slashed pensions and salaries by more than a third, pushing the country into a recession spiral.

Tens of thousands of businesses have shut in the process and unemployment has ballooned to more than 20%.

But the Greeks, cut off from the markets since 2010, also know that the belt-tightening is a must if they are to stay in the euro zone, avoid a messy default and a return to the inflationary drachma and a 1960s-style standard of living.

Several opinion polls over the weekend show that the New Democracy conservatives and the Pasok socialists are winning back some of their voters and could yet form a coalition government that will stay the course after repeat elections on June 17.

But the polls also show the leftist Syriza party, propelled to prominence on a fierce anti-austerity campaign, continuing to win support and pointing to a nail-biting race for first place with New Democracy that could determine the fate of both Greece and the euro zone.

For the sake of both, Greece should be left in peace to decide its future, say leading figures within New Democracy. They say a cacophony of threats, contradictory statements and unprecedented interventions from European leaders do little more than increase the confusion and turn the electorate even angrier.

Comments from Eurogroup President Jean-Claude Juncker, for example, has raised eyebrows in Athens.

Last Monday he said after a meeting of euro-zone finance ministers that any talk of Greece leaving the euro was “nonsense and propaganda.”

He warned against hectoring Greece and summed up by saying that the “exit of Greece was not subject of our discussions” and “absolutely no-one has argued for that position.”

But then on Saturday he told German magazine Spiegel he had warned Finance Minister Filippos Sachinidis that “if we were to hold a secret vote now about Greece staying in the euro zone, then there would be an overwhelming majority against” and that the next elections were the country’s “last chance” to stay in the euro zone.

Chancellor Angela Merkel reportedly went even further.

Greek interim Prime Minister Panagiotis Pikrammenos claimed in a statement that she suggested to President Karolos Papoulias that Greeks hold a referendum simultaneously with the elections on whether they want to stay in the euro.

The chancellery denied it, but Spiegel also reported that German Finance Minister Wolfgang Schaeuble had mooted the possibility of Greece holding a referendum.

Add to this comments by EU Trade Commissioner Karel De Gucht that the euro zone was working on “emergency scenarios if Greece does not make it,” and an immediate denial by Financial Affairs Commissioner Olli Rehn that “we are not working on the scenario of a Greek exit,” and the message to the Greek voters is that their creditors are as confused and frightened as they are.

“Merkel’s suggestion of a referendum is a brutal intervention into our internal affairs and plays right into the hands of Syriza and the anti-German sentiment they cultivate,” a senior New Democracy official said.

“These scare tactics and threats could well backfire and produce an even bigger protest vote. So the suggestion to our partners is that if you want a sane vote next month shut up and let us get on with it.”

The truth is nobody can afford a Greek exit.

Initial estimates put the cost of a Greek pullout north of €500 billion, or the entire emergency firewall the euro zone has put together to finance all troubled economies in the 17-nation bloc.

Judging from the turmoil the inconclusive Greek vote caused to international markets, an exit could bring nothing less than chaos and the possible demise of the euro.

What the Greeks need is some kind of reassurance that there is light at the end of the tunnel within the euro-zone to justify the economic misery they are going through.

The decision to allow them into the euro was a big mistake many would agree, but pushing them out could prove to be fatal.